IND AS 103 BUSINESS COMBINATION

In Crones
Balancesheet of Tagati cld Balance sheet d TATA Ad

91IT'The wait iane 8int tYIneYmYIeiane

ShCopied 100 100 PPE 500 350 ShCopied 50 50 PPE 250 390
300 Reselyeh 300 300 Intangible
Resergfu 400 400 IntangibleAsset 200 300 270
Assets

InvestmentProp 100 10 I'pygmy 150 180

Inventories
hanging 250 250 Inventories 50 50 hoanabannoma 350 350 60 50
Creditors 130 V20 Cash 30 30 Creditors 80 80 Cash 20 20
880 880 780 780

Jagati ad Acquired 1001 shares of TATA ud for 7500cm Prepare Business

Combination Alling at the Date of Acquisition It beaned tax impact

AGuinerBlsitemrecorded at
Ganging
301 cons Bystreet
Assets Acquire Asset's iab taken at fair value

PPE 500 t 390 890

Intangible Assets 200 t 270 470
Investment Prop 100 T 180 280
Inventories 50 t 50 Punaffsicurgtied 100

Cost 30 t 20 500 450

Goodwin 20 20

1310
Equity liabilities

share Capital Emanu uso 100

Gsn 1500
Reserve Surplus yoo aw yoo
Yee
Nancontrollinginterest

Loan from Bank 250 t 350 600

Creditors 130 t 80 210
1310

Caf of Goodwin learnM BPurchase Cal of Bank Balance

Assets taken over 910 CoshBat 4 Acquinen 30
390 27041804504203 20
in n n
Aqui nee
liabilities taken over 930 50
13504803 C D e Paid in Cash 1500

Met Assets than over 480 Net CashBalance 450

consideration paidinCash 500
Goodwin Excesspaid 20
Points to Note while preparing Balance sheet

1 Record All items Equity Reserves liabilities Assets

of Acquirer at their
respective carrying Amounts Fon acquired
ignore fair value3 7
Blotched

2 Pull All the Assets liabilities of Aquinee at fair value Ignore Equity
Reserve Also If fair valueis not given Assume CA to be fairvalue 480
3 Calculate Purchase consideration Paid Bob Gsh Non Cash 500

4 Diff between alet Assets they D C Pu'd recorded an Goodwill Gain on B P

a w 20
 r

Input process and output Loutputnotnecessary

Business Combination is different from Asset Acquisition
Following are the key Differences

Ir Example
CA Fair value
hand 7 200000 300000
Machinery 7 70000 90000
Intangible Asset 7 50000
4000
440000
Purchase consideration Paid 4600003475000
Transaction cost Paid 15000 Indie
Asset AcquisitionsRested Business Combination
Consideration Paid 475000 Trans lost Maid E 15000 changed to
460000 15000 Profit In loss
Measurement All Assets Acquired measured at

Lord 7475000 30948000 323863 fail value

Mach 747500049000440000 97159 Difference bet Gmideration Paid

9 Asset7975000750008,40000 53978 fair value of meets acquired a

475000 adjusted as Goodwill Gain on BIP
 I
Lend All Dr 323863 Land AK A 300000
Much Me Dr 97159 Mach All M 90000
9 Asset All Dr 53978 9 Hel Ali W 50000

70 Bank 475000 Goodwill Dr 20000

To ash 460000

nd As prohibits recognition ofDeferred Trans lost Pk A15000

tapes foetemp Diff that arise upon To Bank 15000
Initial Recognition of asset ab w
a it is not a Business comb cleaned tuxes are recorded
6 Affects neither accounting not for temp Differences
taxable profit
As Per End As 103 contingent liab
As Period As 37 Contingent are measured at fair value
liabilities are not recognised win subsequent charges to Pk

consideration Paid 10004400 1400 Equipment All Dr 467

Equipment 1400 500 467 Patent Ale M 933
1500
To Bank 1000
Patent 1400 109900 933 To land 100
To profit on sale 300
 Elements of Business
1 Input Don Current Assets Including Intangible Assets etc
7
2 Procees D System standard Protocol organised Workforce
3 Output 7 Results of Input and process applied tothose inputs

FURTHER ASSESSMENT CONCENTRATION TEST Discussed

separately on You tune Link on Description

THE ACQUISITION METHOD

1 Identify ACQUIRER
2 Determine Acquisition Date
3 Recognise Measure Identifiable Net Assets Assume liabilities
and any was Controlling interest Capital Reserve

4 Recognise Measure Goodwin on Gain on Bargain Purchase

1 The acquire a Inquiring Enterprise is the enterprise which

obtains control as per And As 110

To Direct RelevantActivities
Priggish
deny
 2111,1 Iggy
1 moon
Assets liabilities the Acquired
Acquisition through payment of Cash
is usually the entity that transfers Cash other Assets liabilities

Acquisition through issue

of Equity Instruments the Acquired
is usually entity that issues its equity interests
the
However in Reverse Acquisition the issuing entity is the Acquire

Other facts considered in Identifying Acquired including

Acquired usually the Entity

Receive
largest portion 3 whoseownell have ability 5 That Rays premium
of voting rights in to electappoint remove majority over pre combination
combined Entity ofmembers ofGoverning body fair valueofEquity
of combined entity interests

2 Holds coolest minority 4 Whose mat dominates 6 Whoserelativesize Asset

voting interestand noother the nyt of
combinedEntityrevenue profit significantly

has significant votinginterest greaterthan otherEntity

 gm ng

In Caseof Reverse Acquisition

Legal Acquired Accounting Acquinee
Legal Acquire Accounting Acquired

2 Determine Acquisition Date Date on which it obtains control

Generally the date on which Aiguilletransfers consideration acquires
assets and assumes liabilities
closing DATE
16 Regulatory approval
necessary Acquisition date will be Date of
Approval

B Determination consideration
of Purchase
1 fair value of Assets 2 Equity interest 3 contingent
transferred liabilities issued considerations
incurred

Direct cost of Acquisition Like binder's fees investment

banker's bees Bonuses to Employee for successful Acquisitions
It is not included in cost of Acquisition but changed to Pk

contingent consideration

Leaksby as Equity financial liability as per Irdas 1093

 Contingent considerate

of220millionin Cash
suppose AGdate
Fairvalue E 15with
PatofPC Y F 15m
Subsequentchargein

Foievalue adiusted
win profit floss

Measurement Principle
At Acquisition Date Acquired shall recognise separately from
Goodwill Identifiable Assets Acquired at foie rate liabilities Assumed
at foie rate and any Non Proportionate fail value
controlling Interest

Exception to the Recognition or Measurement Principle

I contingent liability At Acquisition Date A contingent liabilityis

recognised if it is a present obligation that arises from PastEvents

and its fail value can be measured reliably It is recognised even

if It is Not PROBABLE that outflow of resources refuse to settle
the obligation Andas37
2 Income taxes

2 Indemnification of assets

B sheet
Prov Gov lick 7 250W Indemnification Asset 7 150 a
as
classified
Acquired Alan Current Assets Held for sale
At Acquisition date it is measured at fail value less cost to
sale in accordance win ing as 105
 9

5 Intangible assets Recognise intangible assets if

Transaction meets the definition Assets is Identifiable either by

of Asset contractuallegal criteria a

separability criteria

6 Share Based Payment Transactions Discussed below

7 LEASES
In Case of lessee Emm In Case of lesson
measure lease liability at Presentvalue In measuring Acquisition
ofageist payments as if acquired cease date fair value of Asset
Were a new cease at Algicition Date Acquired shall take into
Measure Rou Asset at same Amountof lease account terms ofthe lease
liability adjusted to deflect favourable or No separate Asset liability
Unfavourable terms when compared with market if terms of operating lease

terms are favorable unfavourable

 8 Reacquired Rights CEg Right to use Acquirers trade name

TXnd ee franchise agreement

It is an Identifiable Intangible asset recognised separately
from Goodwill
If contract teems Favourable unfavourable relative to Current
market teams
settlement gain floss is recognised

Pre Existing Relationship Contractual Non Contractual

Non Contractual Contractual Eg Franchiseelicence

Eg lawsuit Lesser of i il
I Amount by which contract is Favourable
Recognise Gain loss at unfavourable for acquired when compared
fair value win current market transactions
astated SETTLEMENT PROVISIONS in the
contract available to counterparty to whom
contract is Unfavourable

if Cil is less then I diff included as past

of Business Combination Accounting

É É
 Funamostised
150000
liability
settlement 18000

Fairvalue 45000
Purchase I en
consideration

Balancesheet ABCUa M poll ABC ad acquired par up at a

Ph 7 100000
aw goooo Purchase consideration of F 10000,000

Liability 72500002 9N A 770100,000 Exa Reacquired Rights

4you 4400000
Amortisation Outof3100,001000 P.c it is assumed met
Ungmatised 7150000 7180000 is paid to settle Existing Relationship

to settle liability Abc ad should pay MetDC 10000,000 1 80,0003 98,201000

lower of E 180000 as percontract OR Balancesheet After AG

fail value of F 450000 Dn A 7000000

Lowen E 180000 Rejigged 450000

i settlement lose Cash D.c 9820000

F 1180000 1500003
Goodwill 2370000
F 3002
settlement Bisheet
Pll 0000 19ft gain floss lessenof
Asu 180000
CilAmountby whichContractis faut
Unamortised tab
settled 1500007 unfow Comp with Cherney Malley teens
ie 1450000 1500003 300000

of obligation assumed in stated settlement Prov

Note if CA
an Nil then settlement 655 180000 it 150000 201 180000
real assumed c A of tick as nil settlementtoss 7180000
1cal Solution Thoda Sa complicated

3
450000Gt 1500
1

zoom
30000
Lifo on 15000

Attn
1 I er gym
gooo i
an
soon
no
wow g 98001
 7 9
MEASUREMENT PERIOD
e
Ind As 103 provides measurement period Window when all
requited Info not available at acquisition date and
entity does purchase price allocation on a provisional basis

Daring Measurement Period the acquired RETROSPECTIVELY

adjust heloquised Provisional amount to reflect new information
Obtained about facts and circumstances that existed at Ag
date and if known would have affected amount recognised
earlier at Acquisition date
Any change in the al et assets during measurement adjusted
against Goodwill

The Measurement Period Ends L whichever is Earlier

I When Acquired deceives information it was seeking about
back and circumstances that existed at the Acg date
2 When Acquired learns that More Info is not obtainable
3 Measurement Period exceeds One year from Aeg date

contingent daywent to Employee shareholders

if there is a condition of continuous Amployment Post acquisition

will not form part of Purchase condition
then seek consideration

It forms part of Prc only if there is no condition of

Continuous Employment
Acquired share Based Payment Awards Exchanged for
Awards held by Aiguille's Employees

Replacement Awards
An Acquired may replace SBP Awards held by Employees of
the acquire IBM Awards include VESTED UNVESTED Awards
SBP Awards barms past of Purchase consideration only if Acquired
is obliged to replace the Anville Awards

Partof P C 202

Acquire original Award maned Rared at Ag date E 500

venting period completed 2 years
Amount
of SBP Award that forms pactof P C
Market Bared value of resting Period Completed
y
Original Award at Original vesting period of
Period
Acquisition dare aus fans New venting
whichever is greater
500 x 24ms 200 Part of Purchase consideration
gym

value of Post combination Mamet Baied rate SBP Award

Period service of Replacement Award Preta P C
600 200 900 PostCombination
 I
Post Combination service Expenses will be recognised an Exp
Over the Remaining new nesting Period

Bfsheet CAG date

Equity
SB PR 200
Party D c

Nas Replacement Awards

1 Vested shades Measured at their market Based Mean

and valve coedited to SBPR classified as NCI

2 Unveiled Shares
Precombination period Part of NCI
Post combination Period Recorded as Employee cost over Remaining

resting period and credit forms part of NC

Amount Allocated MarketBased Value Vesting Period Completed

to Nci at Aca of SBR Award at X Original ventingperiod or
date Acquisition Date Revised vesting period
Bsweet Blsheet
NU 201 1000 9N A 7 5000 Net 20ll 1000 9 n a s 5000 whichever is Greater
Cash t 415007 4SBPRPast Cash 7 415007
Goodwill 7 500 ofNE 200 Goodwill 7

1000
51
1000
noo noo
 0

L CONTINGENT
subsequent Measurement
CONSIDERATION
Migof
Contingent consideration initially recognised at FAIR VALUE

Subsequent Recognition
of contingent consideration
consideration
Equity other contingent
W N
Not Remeasured Measured at Fairvalue at

f subsequent settlement lack departing date and

accounted within Equity changes recognised in Pll

2 Reacquired Rights

COMMON CONTROL TRANSACTIONS INCLUDING MERGER

 An Entity Can be controlled by Individuals Group of Individuals
and those individuals may not be subject to financial Reporting
requirements of Ind as
Therefore it is not necessary for combining Entities to be
included as part of same CFS for Common Control

Purchase Consideration
The loan denation for Business combination may consist of
Securities Cash or other Assets
Securities At Nominal value
In determining value of hemeidenation Assets other than
CASH shall be considered at their FAIR VALUES
The Balance of Retained Earnings in Fls of transferons
is aggregated aim balance of transferee
Alternatively it is transferred to General Reserve

the identity of Reserves shall be preserved and shall appear

in the same form Example
General Reserve blamer G R of transferee
a
of transferor
b Capital Reserve a
CIR
c Read Reserve a n u RIR n a

d Reserve available for distribution as dividend would also be

available in the same poem after combination

Difference adjusted with capital Reserve instead ofGoodwill